What Indonesia’s 2027 budget really says about the Middle East

Read Indonesia’s new budget plan for 2027, called the RAPBN, and one region keeps showing up. Not once. Not as a small note at the end. Again and again, in the numbers, the risks, and the partnerships. That region is the Middle East.

Most budget documents talk about growth targets and spending plans. This one does that too. But underneath those numbers sits a simple truth. What happens in the Middle East now shapes how much Indonesia pays for fuel, how strong the rupiah is, and how the government plans to borrow money next year.

In 2026, tension between Israel and Iran grew into open conflict. For a while, it looked like Iran might close the Strait of Hormuz, a narrow sea passage near Iran that carries about one fifth of the world’s oil. That fear alone was enough to send oil prices up sharply, at some points passing 100 dollars a barrel. On the supply side, OPEC and its partner producers raised output to calm the market, but the fear itself was already doing damage.

Indonesia felt this directly. The government had planned for its own oil price, called the Indonesian Crude Price, to sit between 75 and 85 dollars a barrel in the first half of 2026. Instead it landed at 90.46 dollars. That gap came almost entirely from the Middle East conflict, not from anything happening inside Indonesia.

To keep fuel and electricity affordable for ordinary people, the government had already spent 142.4 trillion rupiah on subsidies and another 151.2 trillion rupiah on energy compensation by the end of July 2026. Together that is close to 300 trillion rupiah spent, in large part, absorbing shocks that started thousands of kilometers away in the Gulf.

For 2027, the government is not pretending this risk will disappear. Its planning range for the oil price is 70 to 95 dollars a barrel, with 75 dollars as the working number. Its planning range for the rupiah against the US dollar is 16,800 to 17,500, with 17,500 as the working number. In both cases, the document says plainly that tension in the Middle East is one of the main reasons for setting these ranges the way they did.

This matters because it shows the government sees the Middle East as an active, ongoing risk to manage, not a one time shock from last year. It has moved from being a surprise to being a line item, something planners now build into their base case rather than treat as an outside chance.

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But the story does not stop at risk. The budget also shows Indonesia building a real financial relationship with the Middle East, mainly through the Islamic Development Bank, or IsDB, which is based in Jeddah, Saudi Arabia, and was formed in the 1970s by countries working through the Organisation of Islamic Cooperation.

In 2027, Indonesia plans to put 1.78 trillion rupiah into IsDB through several capital increase programs. This is not a small gesture. Indonesia already holds close to 8 percent of the voting power at IsDB, and the government is working toward a permanent seat as Vice President on the bank’s board. That would give Indonesia a steady voice in how the bank spends its money, instead of a seat that rotates away every few years.

The payoff so far has been real. IsDB financing to Indonesia has reached 7.2 billion dollars across project loans, trade finance, and technical support. Six projects are currently active, covering farming, fishing, transport, and health, worth about 1.6 billion dollars in commitments, though only a quarter of that has been drawn down so far. The budget document is direct about why Indonesia is pushing for a bigger role here: a stronger position at IsDB opens doors for Indonesian businesses into wider Gulf and African markets, not just cheaper financing at home.

Indonesia also holds a smaller but interesting seat at another institution, the International Fund for Agricultural Development, where it represents Saudi Arabia’s group on the board. It is a quiet role, but it puts Indonesia inside conversations about how Middle Eastern countries approach food security funding, one small thread in a wider web of ties.

One more number stands out. The budget for the ministry that protects Indonesian migrant workers abroad is set to jump nearly seven times in 2027, from 546 billion rupiah to 3.9 trillion rupiah. The document does not spell out exactly where these workers are, but a large share of Indonesia’s overseas workforce is in Gulf countries. A budget increase this large signals the government expects this population, and its need for protection, to keep growing in the years ahead.

Put these pieces together and a clear picture forms. This budget shows two versions of the Middle East at the same time. One is a source of risk that can raise fuel costs and shake the rupiah within months. The other is a source of capital, market access, and diplomatic standing that Indonesia is actively investing in, year after year.

Anyone reading this budget only for growth targets and tax numbers will miss half the story. The Middle East is not a footnote in Indonesia’s 2027 plan. It is one of the main characters, and the document treats it that way from the first chapter to the last.

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The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.